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Thread: New Idea? Tax Income Based on Wealth

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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by incomebywealth View Post
    Hi everyone, I want to acknowledge that I'm new here. I joined because I can't seem to find any information or debate on this idea anywhere (I'd be very appreciative if you know otherwise) and I'm super curious about it. It seems to overcome some of the downsides of more emotionally-driven approaches yet still to preserve their well-meaning motivations:

    The idea is to base the annual tax rate on wealth (or, to be more precise, wealth plus current income), but to tax only income. This approach seems to incorporate the yearning for fairness behind wealth taxes while avoiding their potentially damaging effects on the economy. The best way to explain its appeal is through a few considerations:

    -Currently, if you have zero net worth but you have a sudden windfall thanks to a great idea and make $1 million in one year, you will currently suffer a similar tax rate as someone who has a net worth of $10 million and also makes $1 million in the same year. For the sake of example, let's say both end up with $650k after taxes. This situation seems to me utterly contradictory to the principle of social mobility that we hold dear. It basically means that the rich stay rich while the poor have to make a *massive* amount to enter a higher social class. However, if we tax income based on wealth, then the less wealthy earner can walk away with (say) $900k while the wealthier one ends up with (say) $550k. This outcome seems fair: the poorer person is now close to a millionaire, while the decamillionaire has around $10.5m instead of just $10 (minus annual expenses of course, but those will be low for someone who previously had a net worth of zero).

    -The "rich" are no longer considered middle class or working class people with windfalls. That is, we make cultural inroads against the unfortunate current conflation between income and wealth by making their distinction explicit.

    -A billionaire will end up with very high income tax, but their wealth will not be touched at all, so they stay wealthy and do not see wealth decline.

    -We end up collecting more overall, which can benefit the middle and lower classes generally, but social mobility *increases* rather than decreases.

    -Getting more rich is easier when your net worth is low but harder when it's high.

    Has this idea been discussed anywhere? I'm interested in pros and cons, and why it is not more widespread.
    I wont get into the theoretical ideology here, but I will comment that it is impractical to tax income based upon accumulated wealth. Wealth is easy to hide and move around, and place in various legal entities. Consequently, a plan to tax base upon wealth would be a nightmare to police & enforce.
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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by incomebywealth View Post
    Hi Lutherf, this example is not where the idea is aimed. The whole point of the idea is that we don't hit your income significantly unless you are already genuinely rich, which a "millionaire" with about $1m is not, because like you said $1m does not generate enough income to be well off. So someone with $1m only would have a low tax rate. But someone with $100m, who is generating e.g. $4m per year income from interest alone, indeed might be taxed heavily on income (yet still make millions each year anyway). Someone who only has $1m is someone who we want to help propel higher through social mobility by keeping their tax rates low.

    I notice there is a political reaction to the original post that is obscuring its motivation. I'm not trying to make a liberal or conservative case on taxation. In fact, the point of this idea is to avoid unduly taxing people with high income. Rather, the point is, we all agree you have to be taxed based on something. And most people agree that directly taxing wealth is unwise. So I'm saying, what we tax is income (as usual) but based on wealth. Of course the graduation of the tax curve needs to be reasonable (as it does no matter what the tax is based on). What would be reasonable there will depend on your political leanings, but the idea of basing the income tax in part on wealth is not clearly aligned with one political side or another. It can greatly benefit high-income individuals, which does not seem to be a current liberal inclination, but it also takes wealth into account, which does not seem to be a current conservative inclination.
    So someone has to be generating income from their wealth before they're "wealthy"? If, for example, I own a Picasso worth $100M I'm not "wealthy" for purposes of taxation but if I own a building worth $100M that generates $100k in rent (I only had it available to rent for a month because I was renovating it) then I am "wealthy"?

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    Re: New Idea? Tax Income Based on Wealth

    i support taxing all income as income above a cap.

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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by incomebywealth View Post
    Hi Lutherf, this example is not where the idea is aimed. The whole point of the idea is that we don't hit your income significantly unless you are already genuinely rich, which a "millionaire" with about $1m is not, because like you said $1m does not generate enough income to be well off. So someone with $1m only would have a low tax rate. But someone with $100m, who is generating e.g. $4m per year income from interest alone, indeed might be taxed heavily on income (yet still make millions each year anyway). Someone who only has $1m is someone who we want to help propel higher through social mobility by keeping their tax rates low.

    I notice there is a political reaction to the original post that is obscuring its motivation. I'm not trying to make a liberal or conservative case on taxation. In fact, the point of this idea is to avoid unduly taxing people with high income. Rather, the point is, we all agree you have to be taxed based on something. And most people agree that directly taxing wealth is unwise. So I'm saying, what we tax is income (as usual) but based on wealth. Of course the graduation of the tax curve needs to be reasonable (as it does no matter what the tax is based on). What would be reasonable there will depend on your political leanings, but the idea of basing the income tax in part on wealth is not clearly aligned with one political side or another. It can greatly benefit high-income individuals, which does not seem to be a current liberal inclination, but it also takes wealth into account, which does not seem to be a current conservative inclination.
    You message is the lie told to create the federal income tax. It was assured this would ONLY be 1% and ONLY against the rich. But after passed, it immediately became 2%. Then 10%, all the way up to 90% in WW2, and the government taking money out of EVERYONE's paycheck to this day - no exception. Maybe, maybe, you'll get some back. Then the super rich wrote exemptions for themselves - so pay no income tax.

    This is EXACTLY what would happen with a wealth/personal property tax. It would be sold as a tax ONLY against the rich - but would become a tax against everyone, with the rich having the political means to get themselves exempted - and that assumes they even keep their wealth in the USA.

    You didn't answer the question. What percentage would you be willing to pay on all your personal property you have every year? 5%? 10% 30%?
    How do you like being under government ordered house arrest for the crime of existing?

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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by joko104 View Post
    The core doctrine of socialism is that NO ONE owns anything they have or even their own labor. Everyone is born in debt to the collective, which also then owns everything and everyone. A wealth tax, ie federal property tax, is consistent with this view. You own NOTHING. Rather, you rent everything you have annually from the federal government. Can't pay the rent on your car, computer, etc - then you lose it.
    In other words, divine rule, the king owns all, us peasants have what we have at his pleasure.
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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by incomebywealth View Post
    Hi everyone, I want to acknowledge that I'm new here. I joined because I can't seem to find any information or debate on this idea anywhere (I'd be very appreciative if you know otherwise) and I'm super curious about it. It seems to overcome some of the downsides of more emotionally-driven approaches yet still to preserve their well-meaning motivations:

    The idea is to base the annual tax rate on wealth (or, to be more precise, wealth plus current income), but to tax only income. This approach seems to incorporate the yearning for fairness behind wealth taxes while avoiding their potentially damaging effects on the economy. The best way to explain its appeal is through a few considerations:

    -Currently, if you have zero net worth but you have a sudden windfall thanks to a great idea and make $1 million in one year, you will currently suffer a similar tax rate as someone who has a net worth of $10 million and also makes $1 million in the same year. For the sake of example, let's say both end up with $650k after taxes. This situation seems to me utterly contradictory to the principle of social mobility that we hold dear. It basically means that the rich stay rich while the poor have to make a *massive* amount to enter a higher social class. However, if we tax income based on wealth, then the less wealthy earner can walk away with (say) $900k while the wealthier one ends up with (say) $550k. This outcome seems fair: the poorer person is now close to a millionaire, while the decamillionaire has around $10.5m instead of just $10 (minus annual expenses of course, but those will be low for someone who previously had a net worth of zero).

    -The "rich" are no longer considered middle class or working class people with windfalls. That is, we make cultural inroads against the unfortunate current conflation between income and wealth by making their distinction explicit.

    -A billionaire will end up with very high income tax, but their wealth will not be touched at all, so they stay wealthy and do not see wealth decline.

    -We end up collecting more overall, which can benefit the middle and lower classes generally, but social mobility *increases* rather than decreases.

    -Getting more rich is easier when your net worth is low but harder when it's high.

    Has this idea been discussed anywhere? I'm interested in pros and cons, and why it is not more widespread.
    Why add another tax or make our existing taxes more complicated? Why not just raise income and capital gains taxes and remove loopholes? Or raise estate taxes to tax wealth?

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    Re: New Idea? Tax Income Based on Wealth

    When a board of retired members of Congress of both political parties was asked what to do about taxes - they all out of politics but knowing how the system works, they ALL agreed that solution is a flat tax - no deductions other than for yourself and children, plus phasing out mortgage interest deductions.

    Why? Because most of the tax code exists specifically for exemptions to the truly wealthy. Basically, thru political contributions and influence, they write their own exemptions. NO tax plan will ever tax billionaires and mega billion dollar corporations as long as the tax code allows exemptions. It would be no different for a wealth/federal property tax. There would immediately be hundreds of exemptions and ways to shield wealth from tax liability.
    How do you like being under government ordered house arrest for the crime of existing?

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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by distraff View Post
    Why add another tax or make our existing taxes more complicated? Why not just raise income and capital gains taxes and remove loopholes? Or raise estate taxes to tax wealth?
    Taxes really are too complex. The best option really would be to eliminate all taxes and all forms of income. If we simply make all food, housing and medical care a human right to be provided by government then we wouldn't need to worry about any of this stuff. Doing things that way would have the added advantage of insuring that nobody took advantage of anyone else. The Soviets had a system that worked that way in a lot of respects and their people loved it!

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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by incomebywealth View Post
    Hi everyone, I want to acknowledge that I'm new here. I joined because I can't seem to find any information or debate on this idea anywhere (I'd be very appreciative if you know otherwise) and I'm super curious about it. It seems to overcome some of the downsides of more emotionally-driven approaches yet still to preserve their well-meaning motivations:

    The idea is to base the annual tax rate on wealth (or, to be more precise, wealth plus current income), but to tax only income. This approach seems to incorporate the yearning for fairness behind wealth taxes while avoiding their potentially damaging effects on the economy. The best way to explain its appeal is through a few considerations:

    -Currently, if you have zero net worth but you have a sudden windfall thanks to a great idea and make $1 million in one year, you will currently suffer a similar tax rate as someone who has a net worth of $10 million and also makes $1 million in the same year. For the sake of example, let's say both end up with $650k after taxes. This situation seems to me utterly contradictory to the principle of social mobility that we hold dear. It basically means that the rich stay rich while the poor have to make a *massive* amount to enter a higher social class. However, if we tax income based on wealth, then the less wealthy earner can walk away with (say) $900k while the wealthier one ends up with (say) $550k. This outcome seems fair: the poorer person is now close to a millionaire, while the decamillionaire has around $10.5m instead of just $10 (minus annual expenses of course, but those will be low for someone who previously had a net worth of zero).

    -The "rich" are no longer considered middle class or working class people with windfalls. That is, we make cultural inroads against the unfortunate current conflation between income and wealth by making their distinction explicit.

    -A billionaire will end up with very high income tax, but their wealth will not be touched at all, so they stay wealthy and do not see wealth decline.

    -We end up collecting more overall, which can benefit the middle and lower classes generally, but social mobility *increases* rather than decreases.

    -Getting more rich is easier when your net worth is low but harder when it's high.

    Has this idea been discussed anywhere? I'm interested in pros and cons, and why it is not more widespread.
    You should ask the French how well their wealth tax worked.
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    Re: New Idea? Tax Income Based on Wealth

    Quote Originally Posted by joko104 View Post
    The OP can search "wealth tax" in the search feature. Elizabeth Warren has proposed a "wealth tax." Within days, her campaign fund raising had crashed and so did she in the polls. Ordinary people don't really understand what a "wealth tax" really is. It would be opening the door to what it really is: a federal personal property tax. And like income taxes were started on only 1% for the rich, this quickly became money coming out of EVERYONE's paycheck. The same would happen with a federal property tax.

    How much taxes would the OP be willing to pay every year on his vehicle, cell phone, computer, bicycle, stereo, video games - and everything else? With a federal personal property tax you have work just to keep what you already have.
    It's worse than a property tax that you pay in your town, which only a tax on your home and land. A wealth tax is much more comprehensive since it can essentially include virtually everything you own. It's virtually limitless. IRS guy/gal comes into your home and notices some fancy underwear, well your wealth tax is going up again.

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